PODCAST: Financing the Sub-Investment Grade Credit Customer

Eric Renaud, NFS’s Chief Credit Officer, discusses Sub-Investment Grade Credit Customer on Daily Monitor Podcast.

For many businesses, getting the financing, they need for essential use equipment can be challenging if they’ve hit a rough patch and end up categorized by lenders as a sub-investment grade credit customer. But these tougher credits, also known as C, D or storied credits, do have options available. Eric Renaud, NFS’s Chief Credit Officer, discusses those options and shares a few stories of success from these story credits.

Listen to Eric’s interview on the Daily Monitor Podcast. Or watch the interview on Vimeo.

Sub-Investment Grade Credit Customer


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Podcast (Excerpt)

Featuring Eric Renaud – Chief Credit Officer, NFS Leasing

For many businesses, getting the financing they need for essential use equipment can be tough. If they hit a rough patch, and end up being categorized by lenders as sub-investment grade credit customer. 

These types of credits, also known as C, D or storied credits, do have options available to them. We are going to talk about those options and hear some stories from these businesses in today’s podcast, but before we get started, I would like to take a moment to recognize today’s podcast sponsor, NFS Leasing.

NFS Leasing is a privately-held equipment finance company that provides equipment leases and loans to sub-investment grade businesses including C,D or storied credits. The NFS team looks beyond the balance sheet to understand the business opportunity. Their expertise in business, finance, credit underwriting, and creative deal structuring expand well outside the box and across most every industry and asset class.

NFS Leasing provides flexible custom tailored lease and loan solutions for transactions between $25,000 and up to $15 million. Since its inception, NFS Leasing has exceeded $1 billion in originations, through supporting businesses and business owners with less than perfect credit and big ideas. 

With an eye towards the entrepreneur and an experienced leadership team, NFS Leasing has worked with over 5,000 clients and partners across the business spectrum, making a positive impact in the community. 

Hi everyone, I’m Rita Garwood, I’m editor in Chief of Monitor. Joining me today on the Podcast is Eric Renaud. Eric is Chief Credit Officer at NFS Leasing. Eric thanks for joining us today. 


Thank you Rita, I appreciate the opportunity to speak to you and the Monitor.


Yes, we are really excited about it. So, the first question I had for you is about the sub-investment grade mid-ticket and large ticket businesses. That is a really niche audience, so to start us off, could you tell us who those businesses are and what is a typical profile or the characteristics that you see in these businesses?


Yes, absolutely. So businesses are generally pocketed into some broad categories. I like to call them A through D credits. We focus on the sub-investment or the C and D credits. Otherwise known as storied credit – because it’s like a story behind the financials that you really don’t perceive when you just look at data. These are companies that really cannot obtain traditional financing, because they have some form of challenge. Generally some form of financial challenge. 

It could be a couple of things. It could be a new or start-up company that does not yet have revenue, or it could be an existing established company that has run into some financial challenges that is causing them not to be able to obtain traditional financing. We do deal with customers that are pre-revenue, but they have raised some capital from investors, so they don’t have revenue – but they have some money on their balance. Then there are companies that are looking to grow or expand or really provide a new product or service – and they need new equipment to do so and they are growing very fast, so we help. So those types of customers also have some challenges.


Sounds like there is a broad range of stories there. Are there any specific industries or asset classes where you see these types of credits?


You know, we actually service storied credits across all industries because most businesses, if they need equipment, which we are providing equipment financing, it covers a broad spectrum of industries. Some lenders and finance companies only focus on a certain industry, maybe they are very niche in their industry. With NFS Leasing, we have been around for 16 years. We provide financing across every industry, with the exception of cannabis in the U.S. We do provide cannabis financing in Canada. 

We have the ability to finance U.S. and Canadian companies.  Some (very) common industries we see are manufacturing, medical, scientific companies, construction, transportation. So, we see everything from A to Z in industries.  It’s really great to be able to cover a wide range of industries, because we get to help companies that need financing, that fall into that storied credit world. 


So, can you talk about the structures and the types of financial solutions that those sub-investment grade customers usually go for?


Yes. So, oftentimes they’ve been turned down by other finance companies. When we look at their information and financials, we are trying to do a couple of things.  One, pinpoint what their challenges are financially and we do that by looking at data, looking at their financials, but we also speak to the customer. Right. So, that is one of the key things of the storied credit, you have to get the story. You have to spend time talking to the customer, understanding their business, understanding where their challenges are, how we can address those through helping them obtain equipment financing that they need.  Most companies that come to us, they need equipment that is mission critical or revenue generating for them. So it’s really important that they obtain the equipment financing so they can help their company grow.

So, before we even talk about structure, we are really trying to understand where the challenge is and then how the customer intends to address that challenge. So, a lot of times if they need new equipment, it’s to help them replace older equipment, or maybe to help them become more productive and save on labor costs and other things.  Our ultimate goal is to find a way to say yes. Find a way to help the customer and we do that through structuring of the transaction. Now, every customer is different, so not every situation or every customer has the same scenario.  Our solutions are customized and really geared towards helping each customer based on what their need is. 

We offer fair market value leases, EFA’s, we provide loans, but aside from the product, we can be flexible – on money down for instance or the term.  Right. Or we may ask, what other collateral is available to help support the risk, is there additional collateral, maybe real estate.  We use a lot of different unique tools to help get the customer the financing they need for their equipment and structure is a big part of it. Things like ramped up payments, or skip payments to help them manage their cash flow or step down payments – what we are really trying to solve for. Rita, it’s (about) the ability for the customer to succeed.  We don’t want to provide financing for them, if they are already in a challenging situation to squeeze them and have them not be able to perform. So we really want to structure our financing to meet their ability to pay it back based on where their business is and based on where they are projecting to go. So, very flexible terms of structure.

And it is really one of our key components.  Besides being very responsive it is that we can custom tailor our solutions to our customers. Storied (credit) customers don’t fit into a box, so most typical solutions that you will see in the marketplace really won’t fit what they need.


That is great, it sounds like you give them a lot of really personalized attention and customization depending on what is going on in their story. So, can you give me some examples of some of these deals that you’ve worked on. You know, the customer, with the situation they are facing and the solutions that you are providing.


Yes, absolutely. We have been around for 16 years, so we have funded over a billion dollars of funding.  We’ve helped thousands of customers, thousands – but I’ll give you a couple of examples. 

A great example, we had a customer who was in the scientific space, we had a transaction come from a Vendor Partner of ours, and they were looking for about $2,000,000 worth of equipment financing, but the company was pre-revenue, so it had not made any money yet. There was no revenue for the company. They could not get traditional financing because of that.

We were able to look at a couple of things. One, we had determined that they had raised about $10,000,000 of capital over the last two years and they were using that money to get into some pre-testing.  So in the scientific space, what this company was doing was testing for cancer research, so it’s a great cause and that is why the company needs this equipment and they were right at the tipping point of obtaining the approval to start offering this and generating revenue.

So, we looked at the investors that went into the business and put their money in.  How much cash are they burning – and we got really comfortable with the fact that they had enough cash on their balance sheet to manage the gap between us providing the financing and when revenue was expected.

We were able to provide financing to that customer with some money down into the transaction and with two of the investors providing support for the risk. So a very exciting story there. That company is doing some great work. That’s one example of a company that had no revenue at all and we were able to structure something for them.

Another example is this transaction from a manufacturer. This came to us from one of our Broker Partners and the manufacturer was actually a twenty year old, family-run, third generation business. They provided supplies to the food industry, restaurant industry, which of course, during COVID, 2020-2021 they had some challenges. Right. Their business had a big impact because of that, and because of that, they could not obtain traditional financing. But they needed equipment, about three million dollars of equipment to upgrade their manufacturing line.  From talking to their customer, they found out that their old line was not efficient, it was always breaking down, it had people working double overtime just to try to keep up with demand. Now it’s mid 2021 and demand started coming back for the restaurants.

We were able to say, look, if we help this company with this new line, it’s actually not only going to give them new equipment, it’s going to solve a lot of the cash constraint problems that they are having. So, that is another example of how we structure. We were able to take a security deposit from the customer because they needed to order equipment, this new line. Because of some supply chain that everyone knows the issues that are happening – it took a few months to get the equipment in. We also took a lien on the real estate they had, commercial real estate. They had a second lien that had some equity in that building.

The company since has been doing great and they really saved a lot of headaches by having us come in. So that is just two examples.  We actually have a wall in our office with the logos of all the companies that we have helped over the years. So when you come into the office, you see it. It’s pretty amazing and it’s really humbling to see all the companies that we have helped that were  unable to get financing otherwise. Right. They were storied credits that turned into success stories and we were able to help these companies succeed and thrive. It’s one of the key things as to why we do what we do. We love helping these companies.


That’s awesome. I love that you have them all on the wall and that they all have these stories and it sounds like from the examples you’ve provided, the companies really needed it and deserved to have that credit extended and you were able to look beyond, you know, traditional credit limits and get it to them. So, on the other hand, you know banks and other lenders are turning these storied credits down. What is the benefit to you for serving businesses like these?


Well, a couple of things.  It is great serving a niche that is storied credit, right, that is all we do. That is all we focus on. So we are really good at it and we have built a great team and structure around how to be effective with doing that.  It really comes down to a little bit of what I just talked about – helping businesses that we consider underserved. There are a lot of companies that, if we couldn’t help them, they wouldn’t be around, right, what does that mean? They wouldn’t be able to hire the people that they hire. They wouldn’t be able to make a living themselves. So really supporting an economy is one of the most rewarding things for us. 

We are a profit company of course, but we want to help these companies and we are really good at understanding where the challenges are beyond the balance sheet. What we mean by that is, we look at the balance sheet and we look at the financials, but we really want to understand.  We do a really good job of understanding – how do we manage that and how do we get past that, understanding the story of the customer and how they plan to make their business improve.

One of the things that we like as a success story, is when a customer actually outgrows us. If they came to us as a storied credit, maybe they moved up to an A or B credit because we helped them. So, it makes us be a good steward in the world I guess, but more importantly, we help businesses get the financing that they need that they wouldn’t otherwise get.


That’s great, so that was the last question I had for you, any final thoughts on this topic? 


Well, a couple of things. I think, first off, if you are a small business owner or business owner that is turned down for financing and maybe isn’t aware that there is an opportunity, NFS Leasing is here. We have been here sixteen years and we would love to talk to you about your financing needs.

In addition, we are recording these sessions, so there is no Q&A, but if folks out there want to get in touch with us to learn more about becoming a vendor partner or a broker partner with us, we would love to talk to you, and see how we can help you. We help a lot of vendors who today are turning away business that they think they would not be able to get approved and we are able to help vendors who are selling equipment get approvals and sell equipment through financing with us. Same thing with brokers with deals, maybe they didn’t realize that there were other avenues for financing.  Please reach out to us, to see how we can help. You can contact us at our website at www.nfsleasing.com and you can email us at [email protected]. We appreciate the opportunity to help.


Thanks so much for talking with me today, I really appreciate it.


Yes, thank you Rita, I appreciate it, and if you have any questions, please reach back out.




Alright, thanks.


Thank you.